“estimation of income”

Assessment ProceduresSection 145Section 1453,061 judgments

The decision most relied on for estimation of income is CIT v. Simit P. Sheth (356 ITR 451), cited in 1,465 judgments on BharatTax.

Leading authorities on estimation of income

CIT v. Simit P. Sheth

356 ITR 451 · 2013 · High Court

1,465

citing judgments

When purchases are unproved or presumed to be from the grey market, the entire amount of such purchases should not be disallowed; instead, income can be estimated by applying a reasonable gross profit rate to the unaccounted sales or turnover, especially in assessments arising from search proceedings involving seized documents.

Rotork Controls India Pvt. Ltd. v. CIT

314 ITR 62 · 2009 · Supreme Court

739

citing judgments

A provision for expenses, such as warranty, is a deductible liability for income tax purposes if it constitutes a present obligation arising from past events, and a reliable estimate of the amount of obligation is possible.

Sanjay Oilcake Industries v. CIT

316 ITR 274 · 2009 · High Court

460

citing judgments

In cases of alleged bogus or unverifiable purchases, rather than disallowing the entire purchase value, a reasonable profit element or a proportionate percentage of the purchases should be added back to the assessee's income.

Kachwala Gems v. JCIT

288 ITR 10 · 2007 · Supreme Court

332

citing judgments

In a best judgment assessment, some guesswork is inherent, but the estimate must be fair and not arbitrary. Books of account can be rejected under Section 145(3) if the assessee fails to substantiate entries or prove the genuineness of transactions, leading to estimation of income.

CIT v. Devi Prasad Vishwanath Prasad

72 ITR 194 · 1969 · Supreme Court

272

citing judgments

If there is an unexplained cash credit, the Assessing Officer can treat it as the assessee's income, even when the income is finalized on an estimation basis, without proving its specific source. The onus then shifts to the assessee to prove that the income represented by the cash credit has already been taxed.

Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali

90 ITR 271 · 1973 · Supreme Court

232

citing judgments

The Supreme Court established principles for best judgment assessments, stating that some guesswork is inevitable but the assessment must be bona fide, rational, and free from bias or capriciousness. An appellate authority cannot substitute its judgment for that of the Assessing Officer unless the AO's assessment is shown to be biased, irrational, vindictive, or capricious, especially when the assessee fails to provide proper accounts or counter-evidence.

CIT v. Balchand Ajit Kumar

263 ITR 610 · 2003 · High Court

212

citing judgments

When making an addition for unaccounted receipts, on-money, or non-genuine purchases/sales, the addition should be restricted to the estimated profit element embedded in such transactions, rather than the entire gross amount, particularly when evidence of corresponding expenditure is incomplete. This estimation often involves applying a net profit rate.

Harigopal Singh v. CIT

258 ITR 85 · 2002 · High Court

203

citing judgments

Penalty under section 271(1)(c) cannot be levied when an addition to income is made on an estimated basis without concrete evidence of concealment or furnishing inaccurate particulars of income. The provisions of section 271(1)(c) are not attracted to cases where income is assessed on an estimate basis.

Judgments citing estimation of income

Mokama Munger Highway Limited, Hyderabad vs. Dy. Commissioner of Income Tax, Circle-16(2), Hyderabad

In the result, all the three appeals of the assessee are partly allowed for statistical purposes

ITA 2146/HYD/2018[2015-16]Status: DisposedITAT Hyderabad03 Jul 2019AY 2015-16

Bench: Smt. P. Madhavi Devi & Shri S.Rifaur Rahman

For Appellant: Shri D.V. AnjaneyuluFor Respondent: Shri Y.V.S.T. Sai, (CIT) DR

Section 143(1)Section 143(2)

Mokama Munger Highway Ltd Hyderabad. reporting of toll collection since the beginning. The Assessing Officer and the CIT(A) had estimated the income @ 5% of total collection as unrecorded for assessment years 2006-07 to 2011-12. The Assessing Officer has included the said additional income as income from other ... said case, the issue that evidence of one year cannot be utilized for another year, was not raised and consequently, the estimation of income was made for search period. The Tribunal considering the said facts and arguments of the assessee before it, held that the said decision was not applicable

Mokama Munger Highway Limited, Hyderabad vs. Income Tax Officer, Ward-16(4), Hyderabad

In the result, all the three appeals of the assessee are partly allowed for statistical purposes

ITA 2145/HYD/2018[2014-15]Status: DisposedITAT Hyderabad03 Jul 2019AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S.Rifaur Rahman

For Appellant: Shri D.V. AnjaneyuluFor Respondent: Shri Y.V.S.T. Sai, (CIT) DR

Section 143(1)Section 143(2)

Kolla Madhusudhan, Nellore vs. Income Tax Officer, Ward-4, Nellore

In the result, appeal of the assessee is allowed

ITA 2055/HYD/2018[2014-15]Status: DisposedITAT Hyderabad03 Jul 2019AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahmanassessment Year: 2014-15 Kolla Madhusudhan, Nellore. Vs. Income-Tax Officer, Ward – 4, Nellore Pan – Apepk 8623 C (Appellant) (Respondent)

For Appellant: Shri K.A. Sai PrasadFor Respondent: Date of hearing

Section 143(1)Section 143(2)

profit and the judicial settlement of the issue in the cases who are engaged in the trading of liquor, the AO estimated the income of the assessee @ 5% of the goods put for sale i.e., opening stock + purchases made as reduced by closing stock as shown in the profit & loss ... When the assessee preferred an appeal before the CIT(A), the CIT(A) directed the AO to estimate the income at 4% on cost of goods put to sale. 4. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal

Mokama Munger Highway Limited, Hyderabad vs. Asst. Commissioner of Income Tax, Circle-16(2), Hyderabad

In the result, all the three appeals of the assessee are partly allowed for statistical purposes

ITA 1729/HYD/2018[2013-14]Status: DisposedITAT Hyderabad03 Jul 2019AY 2013-14

Bench: Smt. P. Madhavi Devi & Shri S.Rifaur Rahman

For Appellant: Shri D.V. AnjaneyuluFor Respondent: Shri Y.V.S.T. Sai, (CIT) DR

Section 143(1)Section 143(2)

M/S Mataji Reality Developers Pvt. Ltd., Beawar vs. Income Tax Officer, Ward-1, Beawar

In the result, the appeal of the assessee is allowed for Statistical

ITA 548/JPR/2019[2013-14]Status: DisposedITAT Jaipur03 Jul 2019AY 2013-14

Bench: : Shri Ramesh C.Sharma, Am & Shri Vijay Pal Rao, Jm Vk;Dj Vihy La-@Ita No. 548/Jp/2019 Fu/Kzkj.K O"Kz@Assessment Year : 2013-14 Cuke M/S. Mataji Reality Developers Pvt. Ltd. The Ito Vs. Mataji Towers, Mewari Bazar Ward-1 Beawar Beawar Lfkk;H Ys[Kk La-@Thvkbzvkj La-@Pan/Gir No.: Aahcm 1290 Q Vihykfkhz@Appellant Izr;Fkhz@Respondent Fu/Kzkfjrh Dh Vksj Ls@ Assessee By :Shri P.C. Parwal, Ca Jktlo Dh Vksj Ls@ Revenue By : Shri K.C. Sharma, Addl. Cit-Dr Lquokbz Dh Rkjh[K@ Date Of Hearing : 02/07/2019 ?Kks"K.Kk Dh Rkjh[K@ Date Of Pronouncement : 04/07/2019 Vkns'K@ Order Per Vijay Pal Rao, Jm This Appeal By The Assessee Is Directed Against The Order Dated 14-08-2017 Of Ld. Cit(A), Ajmer For The Assessment Year 2013-14. The Assessee Has Raised The Following Grounds: ‘’1. The Ld. Cit(A) Has Erred On Fats & In Law In Confirming The Trading Addition Of Rs. 73,49,533/- By Disallowing 25% Of Construction Expenses Of S 2,93,98,132/-.

For Appellant: Shri P.C. Parwal, CAFor Respondent: Shri K.C. Sharma, Addl. CIT-DR

Section 142(1)Section 143Section 143(2)Section 144Section 145(3)Section 44ASection 68

provision of Section 144 of the Act for making best judgement assessment. The AO instead of framing the assessment by estimating the income has made disallowance of expenditure which is not permissible. Even in the case of best judgement assessment, the AO cannot act arbitrarily for which he is bound ... material available with the AO. The AO 6 M/s. Mataji Reality Developer Pvt. Ltd. vs. ITO, ward 1 , Beawar instead of estimating the income on the basis of some reasonable and proper criteria being GP or NP has resorted to make disallowance of expenses which is not a permissible course

J.K. Jewellers International, Jaipur vs. Income Tax Officer, Ward-6-2, Jaipur

In the result, appeal of the assessee is allowed for statistical purposes

ITA 29/JPR/2019[2010-11]Status: DisposedITAT Jaipur01 Jul 2019AY 2010-11

Bench: Or At The Time Of Hearing.”

For Appellant: Shri S.L. Poddar (Advocate)For Respondent: Shri J.C. Kulhari (JCIT)

Section 143(3)Section 148

books of account are rejected by the AO, then the only option with the AO to make the best judgment assessment by estimating the income of the assessee on the basis of the average GP of past years. Thus the ld. A/R has submitted that the Tribunal has deleted ... submitted that the Tribunal has held that average GP of past years is a proper and reasonable basis for estimation of income. Therefore, by considering the GP declared by the assessee in the year under consideration, no addition is required even after rejection of books of account. 6. We have

Sri Mohammed Maqsoor Ali, Raayachuru vs. Income Tax Officer Ward-1, Raayachuru

In the result, this appeal of the assessee is treated as partly allowed

ITA 366/BANG/2019[2010-11]Status: DisposedITAT Bangalore28 Jun 2019AY 2010-11

Bench: Shri N.V. Vasudevanassessment Year : 2010-11

For Appellant: Shri Ashok A. Kulkarni, AdvocateFor Respondent: Shri Satyasai Rath, Addl CIT(DR)(ITAT), Bengaluru

whether the CIT(Appeals) was justified in confirming the addition of Rs,19,01,830 to the total income of assessee by estimating the income of assessee from transport business @ 8% of the gross receipts of Rs.2,19,66,114 (wrongly mentioned as Rs.2,37,72,900 in the order ... total income of the assessee declared in the return of income. 4. Before the CIT(Appeals), the assessee reiterated his case that estimation of income as done by the AO was unreasonable. The said objection was, however, rejected by the CIT(Appeals) by holding that without bills & vouchers in respect

Greenko Budhil Hydro Power Private Limited., Hyderabad vs. Asst. Commissioner of Income Tax, Circle-2(2)., Hyderabad

In the result, assessee’s appeal is treated as allowed for statistical purposes

ITA 1344/HYD/2017[2013-14]Status: DisposedITAT Hyderabad21 Jun 2019AY 2013-14

Bench: Smt. P. Madhavi Devi & Shri A. Mohan Alankamonym/S. Greenko Budhil Hydro Vs Dy. Commissioner Of Income Power Private Limited Tax, Circle 2(2) Hyderabad Hyderabad Pan: Aaacl9828J (Appellant) (Respondent)

For Appellant: Shri S. Rama RaoFor Respondent: Shri Y.V.S.T. Sai, CIT(DR)

started its commercial production in A.Y.2013-14 only. 5. In the facts and Circumstances of the case, the Ld. CIT(A) erred in estimating the income at a rate of 20% without any cogent or credible material on record. The Ld. CIT(A) ought to have compared the Appellant's results ... before the AO and also before the CIT (A) and therefore, the assessment is completed ex-parte the assessee by the AO by estimating the income at 20% of the gross turnover which is quite high in this line of business. Even before the CIT (A), the assessee could

World Trade Impex Ltd., Baroda vs. The ACIT., Circle-4, Baroda

In the result, appeal of the assessee is dismissed

ITA 1614/AHD/2012[1994-95]Status: DisposedITAT Ahmedabad20 Jun 2019AY 1994-95

Bench: Shri Rajpal Yadav & Shri Rifaur Rahman

For Appellant: Shri M.K. Patel, ARFor Respondent: Shri Vinod Tanwani, Sr.DR

Section 142(1)Section 144Section 271(1)Section 271(1)(c)

turnover unearthed during the search. The assessee has not offered any explanation about the income for which it has furnished inaccurate particulars. 6 Estimation of income is by compulsion at the end of the AO and not by choice. It is not case that the AO was not satisfied with

Shri Vinod Singh, Jaipur vs. Income Tax Officer, Ward-5-1, Jaipur

In the result, the appeal filed by the assessee is dismissed

ITA 177/JPR/2019[2010-11]Status: DisposedITAT Jaipur20 Jun 2019AY 2010-11

Bench: The Time Of Hearing Of Appeal.”

For Appellant: Shri Yogesh Kumar Sharma (FCS.)For Respondent: Shri A.K. Mahla (JCIT)

Section 143(3)Section 271(1)(c)

contention raised before the authorities below. 4. On the other hand, the ld. DR has submitted that this is not a case of estimation of income of the assessee but the specific amount was found deposited in the bank and the assessee failed to explain the source of the same ... therefore, the benefit of withdrawal of money from the bank account by the AO would not be treated as estimation of income. He has relied upon the order of the authorities below. 5. We have considered the rival submissions as well as the relevant material on record. The assessee

Lt. Smt. Jamuna Devi, Bharatpur vs. Assistant Commissioner of Income Tax, Circle, Bharatpur

In the result, appeal of the assessee is dismissed

ITA 676/JPR/2017[2008-09]Status: DisposedITAT Jaipur20 Jun 2019AY 2008-09

For Appellant: Shri Manish Agarwal (CA)For Respondent: Shri Ashok Khanna (JCIT)

Section 133ASection 271Section 271(1)(c)

technical ground. With regard to merit of the penalty so imposed, he contended that the penalty was not imposed with reference to any estimation of income but was on the basis of concrete material and incriminating documents found during the course of survey which lead to the precise amount ... which has not been disclosed in the return of income. Accordingly, it cannot be said that the penalty was levied with reference to estimation of income. Accordingly, we do not find any infirmity in the penalty so imposed. 17. Considering the totality of facts and circumstances of the case

General Reinsurance Ag, Mumbai vs. Deputy Commissioner of Income Tax (International Taxation) Range 2(3)(2), Mumbai

In the result, appeal of the assessee is allowed, as above

ITA 7433/MUM/2018[2015-16]Status: DisposedITAT Mumbai14 Jun 2019AY 2015-16

Bench: Shri G.S. Pannu & Shri Sandeep Gosainassessment Year : 2015-16 General Reinsurance Ag, Deputy Commissioner Of Income General Reinsurance Ag India Branch, Tax (International Taxation)- Vs. Units 107, 108, 109, Meadows, Range-2(3)(2), Sahar Plaza Complex, Mumbai Mathuradas Vasanji Road, J.B. Nagar, Andheri East, Maharashtra [Pan : Aaecg5195K] (Appellant) (Respondent)

For Appellant: Shri P.J. Pardiwala &For Respondent: Shri Nishant Samaiya, DR

Section 115BSection 143(3)Section 234BSection 271(1)(c)Section 9(1)(i)

India-Germany Tax Treaty. After having held such receipts to be taxable in India, the Assessing Officer proceeded to estimate the income attributable to such receipts, which could be brought to tax in India. For this purpose, the Assessing Officer observed that the assessee did not furnish any India specific ... decision of the income-tax authorities in treating the impugned re-insurance premiums as taxable in India, but it has also challenged the estimation of income attributable to the operations in India as well as the rate of tax applied to compute the final tax liability. 6. Before

Celltick Technologies Ltd, Mumbai vs. DCIT RG 2(1)(1), Mumbai

The appeal of the assessee is allowed in terms of our aforesaid observations

ITA 4167/MUM/2017[2014-15]Status: DisposedITAT Mumbai11 Jun 2019AY 2014-15

Bench: Shri M.Balaganesh & Shri Ravish Soodcelltick Technologies Ltd. The Deputy Commissioner Of C/O Srbc & Associate Llp Income Tax, Range 2(1)(1), 14Th Floor, The Ruby, 17Th Floor, Room No. 1713, Vs. 29 Senapati Bapat Marg Air India Building, Dadar (West), Nariman Point, Mumbai-400 028 Mumbai – 400 021 Pan – Aadcc9816E (Appellant) (Respondent)

For Appellant: Shri Nishant Thakkar &For Respondent: Shri Nishant Samaiya, D.R

Section 143(3)Section 144C(13)Section 144C(5)Section 9(1)(vi)

refrain from adverting to and therein adjudicating the same. Similarly, the Grounds of appeal No. 10 and 11 relating to justification of estimation of income in India and the rate of tax thereon are also in the same terms rendered as academic. 13. As regards the last Ground of appeal